"Information passed to Team Jedi News via an unnamed source has informed us that Ian McDiarmid is set to return to the galaxy far, far away for a part in Episode VII.
The specifics of the role are unclear, but it seems likely that McDiarmid will be returning to his signature role of Palpatine. Whether as the original or a clone of, we are yet to discern."
There has been no official confirmation or denial from Lucasfilm as of this posting, but some things make me think this rumor has some real legs.
There are a number of way that McDiarmid could be used in Episode VII. Most of these ways would be incorporeal, but there is one way where he could have a very significant role in the film.
The most likely scenario for McDairmid to appear is that he could appear as a holo-recording, a Sith spirit, or as the avatar of a Sith Holocron. Of these the Sith spirit idea is the least likely because during The Clone Wars series Lucas is reportedly to have killed an appearance by Darth Bane and Darth Revan because he didn't like the idea of Sith surviving death in a way similar to Jedi Force ghosts. A holo-recording could have McDairmid appearing in any number of ways. For example if the plot features visits to worlds still under the control of the Imperial military there could be propaganda recordings of the Emperor playing. Or we could have a scenario where through the use of digital projections they create a virtual Emperor and present the Emperor's death as false Rebel propaganda and have the Empire clinging to control with a virtual Emperor being the public face of the Empire still.
The way that I am most intrigued by is the idea that Palpatine created a Holocron in order to corrupt a future Jedi or Force-user to the ways of the Sith. This holocron gets discovered and we see a new character learn from Palpatine and becoming the trilogies villain. In fact we could see a villain's journey that parallels the heroes journey of the protagonist in the film building to the climactic finale in Episode IX.
The way that McDairmid could have a more substantial role as the villain of Episode VII is if they borrow ideas from the Dark Horse Comic's Dark Empire comic books or the Thrawn novel trilogy. Both of these Expanded Universe launching stories relied heavily on the concept of cloning. Dark Empire focused on the cloning of bodies of Emperor Palpatine and the transfer of his essence from his apparent death on the second Death Star into the cloned bodies.
McDairmid is a brilliant actor and Palpatine is a great character, but I don't have much interest in seeing Palpatine return as a clone to be the main villain in Episode VII.
The timing of McDairmid's return to more active involvement in Star Wars coincided rather conveniently with George Lucas' hiring of Kathleen Kennedy, his retirement and sale of Lucasfilm to Disney and his gestating plans for a sequel trilogy. Kennedy was hired in June of 2012 and a few months later Celebration VI (August 2012) marked the first U.S. Celebration that McDairmid attended. We know that in August 2012 Lucas had lunch with Mark Hamill and Carrie Fisher and revealed to them hi plans to go ahead with Episodes VII, VIII, and IIX. It seems likely that if he viewed Palpatine as playing a role in Episode VII that he may have talked to McDairmid that same summer as well.
SOURCE: Jedi News http://www.jedinews.co.uk/news/news.aspx?newsID=12985